Q4 2024 East West Bancorp Inc Earnings Call
Good day, and welcome to the East West Bancorp's fourth quarter 'twenty 'twenty four earnings call. All participants will be in listen only mode should you need assistance leasing a conference specialist by person that Starkey fall by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on a touchtone phone.
And to withdraw your question. Please press Star then two please.
Please note that this event is being recorded.
I would now like to turn the conference over to Adrian Atkinson Director of Investor Relations. Please go ahead.
Adrian Atkinson: Thank you operator, good afternoon, and thank you everyone for joining us to review East West Bancorp's fourth quarter and full year 2024 children.
Speaker Change: With me are Dominic <unk>, Chairman and Chief Executive Officer, Chris Sal morale morale, Chief Financial Officer, and Irene Oh, our chief risk Officer.
Adrian Atkinson: This call is being recorded and will be available for replay on our Investor Relations site.
Adrian Atkinson: Slide deck referenced during this call is available on our Investor Relations site management may make projections or other forward looking statements, which may differ materially from the actual results due to a number of risks and uncertainties management may discuss non-GAAP financial measures for a more detailed description of the risk factors and a reconciliation of GAAP to non-GAAP.
Adrian Atkinson: GAAP financial measures. Please refer to our filings with the Securities and Exchange Commission.
Adrian Atkinson: The form 8-K filed today.
Dominic: I will now turn the call over to Dominic.
Adrian Atkinson: Thank you okay.
Dominic: Good afternoon, and thank you for joining us for today's fourth quarter and full year 2024 earnings call.
Dominic: Before we begin I'd like to express my sympathy to everyone impacted by the wildfires in southern California.
Dominic: I would also like to extend my deep gratitude to the firefighters public service workers and volunteers, who are on the front lines.
Dominic: Helping wood recovery and cleaned up ethics.
Dominic: During this time of need for our city.
Dominic: I'm proud of the actions east West is taking to support our customers our community and our associates.
Well customers impacted by the fires.
Dominic: Offering accommodation on an as needed basis to help those who are impacted focus on the health and safety of their families and businesses.
Dominic: We have also contributed significant relief funds for community members and associates.
Dominic: Were impacted.
Dominic: I'd evacuation.
Who lost their homes.
We have assessed east west exposure.
Dominic: We're just minimal at this time.
Dominic: With that.
Dominic: Let me turn to our financial results on slide four.
Dominic: 2024, with another record breaking year for East West.
Dominic: I'll highlight two.
Dominic: New record levels for revenue.
Dominic: Fee income.
Dominic: Net income.
Dominic: Earnings per share.
Dominic: And loans and deposits.
Dominic: Our results speak to the strength of East West, Brian and so this model.
Dominic: I'm, particularly proud of last years over $7 billion of deposit growth.
Dominic: We grew average deposit by 9% year over year.
Dominic: And average loans by 6%.
Dominic: Further diversifying our portfolio by emphasizing residential and C&I lending.
Dominic: 2024 was also a consecutive year of record fee income driven in part by consistent sales execution.
Ross: Ross I'll wealth management commercial payments.
Dominic: And foreign exchange business.
Dominic: Asset quality remained relatively stable in 2020 full with full year net charge offs and yearend nonpolitical nonperforming assets both of 26 basis points.
Dominic: We maintained a disciplined approach to credit management in the fourth quarter, but dealt with two problem credits, which I will elaborate on later.
Dominic: We believe these cards to be isolated events.
Dominic: And are diligently pursuing recovery efforts.
Dominic: We remain vigilant about managing our credit risk and proactively managing our risk profile.
Dominic: We delivered substantial returns for shareholders and.
Dominic: In 2024.
Dominic: You reported tangible book value.
Dominic: For sure.
Dominic: 13%.
Dominic: Generated a 17% return on tangible common equity.
Dominic: We were opportunistic in the fourth quarter and repurchased 200000 shares.
Dominic: At an average price of $98 per share.
Dominic: I'm also pleased to announce our board.
Dominic: An incremental share repurchase authorization.
Speaker Change: 300 million.
Dominic: Yeah.
Dominic: A 9% increase to the quarterly dividend to <unk> 60 per share.
Dominic: Let me turn it to Chris for more details on the balance sheet.
Chris: And income statement.
Speaker Change: Thank you Dominic let.
Speaker Change: Let me start with deposits on slide five.
Speaker Change: Over the past five years east west growth hasn't been deposit led.
Speaker Change: This has allowed us to fund loans, while maintaining a strong balance sheet liquidity.
Speaker Change: In 2020 for east West to end of period deposits by 13% to a record $63 2 billion.
Speaker Change: In early 'twenty 'twenty, where we also we see four and a half billion of E. T. F T borrowings driven by our confidence and our ability to grow core deposits.
Speaker Change: During the fourth quarter, we saw a notable uptick in DDA and money market balances with continued overall stability in savings and time deposits our deposit mix has stabilized with DDA levels in the mid twenties.
Speaker Change: Our period end total deposit cost declined a further 25 basis points in the fourth quarter to 2.59%.
Speaker Change: Looking into Q1 or 2025 lunar new year CD Special was launched last week offering a six month CD at 4.18% and a nine month CD at 4.08%. We believe these are competitor for our regional markets and we expect good retention and potentially good.
Speaker Change: Traction on new money inflows at these price points, notably these levels are 107, and 117 basis points below last year CD operate at five and of course.
Speaker Change: Turning to loans on slide six east West grew total average loans by 6% for the year and end of period loans by 3% in line with our prior guidance.
Speaker Change: C&I growth in the fourth quarter was driven by new credits as utilization was relatively stable quarter over quarter.
Although we have yet to see evidence of increased demand in Q1, we expect C&I growth to pick up later in 2025, given the improving overall business sentiment.
Speaker Change: Residential mortgage had a good quarter in Q4.
Speaker Change: Partly reflecting the drop in rates, we saw in the third quarter.
Speaker Change: Despite the recent backup in rates pipelines remain pool going into the first quarter.
Speaker Change: We expect residential mortgage growth to continue at its current pace.
Speaker Change: Overall, we expect 2025 loan growth to be in the range of 4% to 6% driven by strong growth in C&I production and continued residential mortgage spreads leading to a further diversified and more balanced loan portfolio.
Speaker Change: At the time.
Shifting to net interest income and net interest margin on slide seven as we guided and I have rebounded in the back half of the year driven primarily by a lower total deposit costs. Our net interest margin was stable at $3 two 4%.
Speaker Change: Interest rates spread widened nine basis points quarter over quarter.
Speaker Change: At the end of the fourth quarter, our end of period interest bearing deposit costs have come down 49 basis points from the second quarter consistent with our expected 50% deposit beta.
Speaker Change: In the fourth quarter, our total hedges cost US 18 million of net interest income or 10 basis points to NIM.
Speaker Change: In January half a billion of negative carry swaps rolled off any further half billion, that's set to roll off in February.
Speaker Change: These to maturity as well alleviate approximately half of our negative hedge impact.
Speaker Change: The benefit of these hedges rolling off our expected balance sheet growth and our improving deposit costs and mix should combine to support net interest income and margin levels from here.
Speaker Change: Our outlook for net interest income assumes 225 basis points cuts during 2025, resulting in a gradually steeping yield curve as the implied.
Speaker Change: Year end curves are.
Speaker Change: Got it.
Speaker Change: Moving onto fee income.
Speaker Change: Fee income grew by 11% over the last four years and grew by 12% in 2024.
Speaker Change: As Dominic mentioned, we achieved record fee income in 2024, our strength over the past year was driven by sales execution and wealth management and foreign exchange and strong traction in Treasury management sales, particularly around commercial payments activity.
Speaker Change: East West has been consistently growing wealth management foreign exchange in deposit account fees at over 20% per year and we remain focused on driving this growth as we look into 2025.
Taking NII and fee income together, we expect total revenue growth in 2025 on the order of five to seven.
Speaker Change: Turning now to expenses on slide nine east West continues to deliver industry leading efficiency.
Speaker Change: Fourth quarter efficiency ratio was 36, 9%.
Speaker Change: Excluding FDIC special deposit insurance assessment charges total operating non interest expenses have grown on an average at an 8% clip over the past five years, including in 2024.
Speaker Change: This is in line with our expectations for 'twenty 'twenty five expense growth is expected to be driven primarily by investments in our people and tech to support our growth strategies now I'll hand, the call over to Perry for some comments on credit and capital.
Perry: Thank you, Chris and good afternoon to all on the call are shown on slide 10, the credit environment is benign and asset quality our portfolio as a whole remains solid.
Speaker Change: They didn't put credit losses increased 28 million from the third quarter to 70 million net charge offs in the fourth quarter was 64 million and net charge offs for the fourth quarter largely stemming from two domestic commercial and industrial credit.
Speaker Change: These two credits one related on both loans are made to companies in the technology sector and we are determined in the fourth quarter at the collateral in a or we're not quite at all.
Speaker Change: Nonperforming assets remained stable at 26 basis points of total assets for the quarter.
Speaker Change: Special mention loans ratio improved slightly to 83 basis points, while the classified loans ratio increased 15 basis points to one body part.
Speaker Change: Absolute level of problem loan migration into criticized loan category and nonperforming loans remain low at manageable levels.
Speaker Change: Regarding the wildfires in Los Angeles, we're actively assessing our exposure from the Palisades. If he had any buyers based on what we currently know we expect our direct exposure to be minimal to date, we have identified 32 loans totaling 26 million outstanding that are impacted.
Speaker Change: They are large and they can see more mortgage loans, but the numbers are inclusive of any direct exposure in the entire loan portfolio, including clarabelle commercial real estate multifamily and commercial and industrial loans.
Speaker Change: Our gross exposures to loans in the vicinity of the huge ball just north of Los Angeles.
Speaker Change: Based on these preliminary results.
Speaker Change: From the impact of the wildfires, we foresee very limited credit impacts to east West at this time.
Speaker Change: We remain vigilant and proactive in managing our credit risk based on what we know today were projecting that full year 2025, net charge offs to be in the range of 25 to 35 basis points.
Speaker Change: As seen on slide 11, our allowance for credit losses ended the fourth quarter at 782 million.
Speaker Change: 1.31% unchanged from the prior quarter, and we believe our loan portfolio as appropriate really due as of December 31st.
Speaker Change: Paul.
Speaker Change: Turning to slide 12 East West what looked like population is the only well in excess of regulatory requirements for well capitalized institution and well above where you get more bank appetite.
Speaker Change: It's less common equity tier one capital ratio stands at a robust 14, 3%, while the tangible common equity ratio got nine 6%. Our board of directors has declared the first quarter of 2025 common stock dividend.
Speaker Change: That's for sure a 9% increase to the dividend the dividend will be payable on February 17 to stockholders of block I'm. Okay.
With that.
Speaker Change: East West Opportunistically repurchase 200000 shares of common stock.
Speaker Change: For the <unk> 'twenty 'twenty four for 20 million. Additionally, our board has approved a new 300 million repurchase authorization, resulting in 301 9 million total authorization available.
Speaker Change: I will now turn it back to Chris to share a few comments on our outlook for pneumonia, Chris. Thank you Irene with respect to our guidance as previously mentioned our outlook assumes modest economic growth and further cuts of 50 basis points over the course of 2025 consistent with a year end yield curve.
Speaker Change: We expect end of period loans to grow in the range of 4% to 6% with continued relative strength in both C&I and residential lending.
Speaker Change: We expect net interest income to grow in the range of 4% to 6% driven by balance sheet growth.
Speaker Change: And total revenue growth in the range of 5% to 7% bolstered by our continued momentum in our fee income businesses.
Speaker Change: Total operating expenses are expected to increase in the range of 7% to 9% year over year, driven primarily by head count and it related expenditures offset partly by lower expected deposit account expenses.
Speaker Change: Again, we expect full year net charge offs in the range of 25 to 35 basis points and our effective tax rate in the range of 21% to 23% with that now let me open the call up for questions.
Speaker Change: Operator.
Speaker Change: Yeah.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two please.
Speaker Change: Limit yourself to one question and one follow up.
Speaker Change: And your first question today will come from Jared Shaw of Barclays. Please go ahead.
Jared Shaw: Yeah, good afternoon everybody.
Speaker Change: Hey, good afternoon Jared.
Speaker Change: Maybe just starting with the expense guide when you when you look at the investments in people and technology that you're that you're highlighting.
Speaker Change: How should we think about that as her being layered in during the course of the year and is most of that in preparation for category for or how would you sort of describe the color around around the investments there.
Speaker Change: Yeah, I think we continue to make the investments we need to be for the bank, we expect to be over the coming years.
Speaker Change: And we expect this bank will be a strong.
Speaker Change: Capable.
Speaker Change: Well positioned bank to meet all the needs of our customers in the years ahead with that in mind I would note that our expense percentage is high relative to perhaps some others, but keep in mind that's off of a much smaller base.
Speaker Change: And so our implied revenue growth far out strips.
Speaker Change: Even the larger percentage of expense growth and leads to positive operating leverage.
Speaker Change: Okay, great. Thanks, Thanks for that color and then.
Speaker Change: Yeah, I guess, yeah, it's great to see the announcement of a buyback or increasing the buyback, but when we look at it in light of sort of the limited amount of repurchase that you've done in the past should we think that this is a change in and the philosophy around utilizing the buyback with this capital.
Speaker Change: Ratio level or is it more you just want to have the flexibility in the future to buy back stock. If you know if something changes.
Speaker Change: The philosophy here has been opportunistic we were opportunistic in the fourth quarter, we will continue to be opportunistic, but we certainly like the price points that we saw in the fourth quarter and we have plenty of flexibility to do what's in the best interests of our shareholders.
Speaker Change: Is is that opportunistic are you only around our share price or is it.
Speaker Change: You know more.
Speaker Change: A broader view of potentially seeing lower capital ratios.
Speaker Change: I think we operate from a position of capital strength that has served the company very very well being one of the better capitalized banks in the history allows us to withstand whatever comes and gives the bank the flexibility to be here for our customers, regardless of the economic or rate environment.
Out there and regardless of events like fighters that may tragically impact some of our customers being here would that strength is a differentiator for east west.
Speaker Change: And if we weren't earning 17% returns on tangible capital it would be of concern, but since we've been able to do that consistently year in year out for years I think it's a great place to be.
Speaker Change: Great. Thank you for that.
Speaker Change: Your next question today will come from Manhattan, Ghazaliyah with Morgan Stanley. Please go ahead.
Hi, good afternoon.
Speaker Change: Good afternoon.
Speaker Change: Hi, I wanted to start on deposit costs are they're down nicely 50 basis points or so on the interest bearing side. So.
Speaker Change: So I guess, you're getting a 50% beta there I know some of you see do you still have to reprice lore.
Speaker Change: So where do you think we should shake.
Speaker Change: Shake out on deposit beta as she has a lot more room for that to go down from here.
Speaker Change: Well I'm on and we've been guiding to about a 50% beta and we're pleased to see that the results over the last couple of quarters have been consistent with that I think will continue to see positive momentum on that as long as rates are moving lower or expected to move lower and so we have that benefit that the C. D is effectively repriced a little.
Speaker Change: Ahead of the actual fed cuts and so that will continue to be to our benefit here over the near term, we will see where things shake out with the yield curve as we get later into the back half here.
Speaker Change: I think last quarter, you'd noted that 20 billion or so of the 23 billion in cities, where due to reprice in the next three quarters do you have that number for <unk> for the end of the fourth quarter.
Speaker Change: Yeah, No there's $10 billion repricing in Q1.
Speaker Change: And another seven ish eight ish and repricing in Q2.
Speaker Change: And then it drops off to less than two in Q3.
Speaker Change: Got it okay, and maybe as a follow up on loan growth. I know you noted that you expect C&I growth to pick up with improving business sentiment could you give us some more color on what you're seeing there and you know maybe as tariffs rolled through how would that have an impact on growth or investment spend among your clients.
Speaker Change: Yes.
Speaker Change: Well I think I heard the first part of your question is sort of what's driving our positive outlook with business sentiment and the reality is as commitments are up 5% year over here. So we know there's dry powder in our customers' capacity to draw and there's active dialogue with a number of customers across a number of industries.
Speaker Change: Obviously, we have a strong entertainment business, we have positive outlooks on that well wait to see what the private equity market does partly rate dependent.
Speaker Change: But we know that there'll be interest in a variety of projects and opportunities as we move through the year and then it will be a matter of time of course those are along the second part of your question Martin I missed maybe you can repeat it. It was just if if tariffs would impact that outlook.
Speaker Change: At this point in time as we look back over the last eight years, the overall growth in the balance sheet, both on the loan and deposit side.
Speaker Change: It was fairly uninfected by both the introduction of tariffs and the extension of tariffs under the by the administration and so the reality is at this point in time, we don't have a reason to believe it'll have a material impact obviously I think we're all waiting to see what tariffs ultimately.
Speaker Change: The pass.
Speaker Change: But based on what we've seen so far and there's a floor in order. So I may have missed something we don't expect much at this point in time, but in any case, our customers have had eight years on their own to prepare for these many of them have reorganized our supply chains. Many of them have prepared themselves for the expectation here of tariffs.
Speaker Change: And so the reality is I think that many of our customers have taken a proactive stance to managing their business and we're being supportive in whatever way, we can but yeah. That's for our politicians to decide where they land on that we're just here to support our customers.
Speaker Change: Just wanted to add.
Speaker Change: Just undergraduate and for the last eight years.
Speaker Change: East West Bank did not make any kind of M&A activity acquisition and whatnot.
Speaker Change: And but we were able to grow our deposit.
Speaker Change: At an annual growth rate of 10%.
Speaker Change: And on the deposit side.
Speaker Change: Coincidentally, we also were able to grow our deposit on an annual basis at 10%.
Speaker Change: So we actually.
Speaker Change: Pretty much all grew most of our competitors at our peer group.
Speaker Change: While we did not even.
Speaker Change: Any kind of M&A activities to supplement that.
Speaker Change: So and that's kind of like give.
Speaker Change: Give you a pretty good perspective that.
Speaker Change: Terrorism more terrorists.
Speaker Change:
Speaker Change: I would tell them global terrorists, whatever right somehow east West Bank will be able to figure out how to navigate I really think that at the end of the day it gets back down to.
Speaker Change: Bob.
Speaker Change: Knowledge and expertise.
Speaker Change: And recognizing where the path that east west should take it.
Speaker Change: And to appropriately find way to grow organically, we've done that.
For the last eight years, and we will feel very comfortable that in the next four years, we would be able to find ways to continue our successful growth.
Speaker Change: I appreciate that thank you.
Speaker Change: And your next question today will come from Ebrahim <unk> with Bank of America Ml. Please go ahead.
Ebrahim <unk>: Hey, good afternoon, I guess, maybe first on just commercial real estate.
Speaker Change: So how do your comments on loan growth.
Speaker Change: He might Miss what we should expect on CRE loan balances are those growing.
Jared Shaw: Are they going to be running off and that's probably netting out in terms of your loan growth guidance and if rates remain where they are or if the curve moves up by another 30 to 50 basis points is there any incremental credit risk that you see in the CRE book.
Jared Shaw: So E D takes a look at the last quarter or the last year total CRE balances are actually down a bit either over both periods.
Jared Shaw: We're focusing on growing our C&I and residential and yes, we expect CRE growth will be more muted as we move forward from a credit risk perspective, I think we would say we have a very strong credit profile in the book, obviously lower rates helps many of our customers in that space higher rates would.
Jared Shaw: Some of the good news is as you know the pages in the appendix of our materials show, our Ltvs are such and our average loan sizes are such that in many cases, you know a small rate impacts will have no impact, but keep in mind. These customers were pain when rates were 100 basis points higher they won't.
Jared Shaw: Really have that many issues, we hope as we move forward and in any case, we're working with all of our customers to make sure. We are ready for whatever changes they face and help them through it.
Jared Shaw: Maybe just also specifically in answer to your question I don't think that kind of model things like longterm rates really impossible.
Jared Shaw: Yeah, that's more tied to the short term.
Speaker Change: That's helpful. Thank you and I guess, just a follow up Chris.
Speaker Change: Chris to your point about on a dollar basis I think you mentioned revenue should expect exceed expenses going up this year, but given sort of this preparation forget for other investments you're making is the efficiency. They should generally trending higher and again its best in class way. It does today, but I'm wondering should we be.
Speaker Change: Thinking about it in terms of the efficiency ratio, maybe drift higher over the next few years or this is just limited to this year in terms of the guidance.
Speaker Change: If we look back over the last several years, it's been growing at a faster clip.
Speaker Change: I think the reality is we're acknowledging the pace that we've been on for the last several years and expecting 2025 won't be materially different we have a long term vision for investing in the platforms and people to make us the bank, we want to be we're going to get there I don't know that that means a change anything about our long term philosophy.
Speaker Change: Being best in class efficiency, and I don't expect it to materially change the average trajectory we've been on for efficiency over the last several years, we've been able to grow.
Speaker Change: The investments, we need to make and deliver consistent profitability over that last decade. The last three decades under Dominic leadership I think we can continue that for several more years ago, Let me add by saying that you know obviously for our style, we would pay more attention to.
Speaker Change: Return on equity return on asset and earning per share growth et cetera.
Speaker Change: Missions. He is one of the components that we all obviously have it available to share with the public.
Speaker Change: It's not for me as a high priority, let me put it this way the reason I say this is that Oh.
Speaker Change: While we are growing.
Speaker Change: We will continue to expand into all of the product and feed revenues.
Speaker Change: And when you change the business model gradually esports would never do anything dramatically. So you don't have to worry about that.
Speaker Change: That's why you see a consistent high performance year in year out quarter after quarter.
Speaker Change: Breaking out the record breaking.
Speaker Change: So you wouldn't have to worry about suddenly we go pivot to a direction that's shocking everybody, but while we are not doing the doctor election, you may notice that.
Speaker Change: We keep calling out is.
Speaker Change: That cut fee incomes wealth management record fee incomes for cash management fee income foreign exchange et cetera, et cetera, right is that we will continue to build out.
Speaker Change: Our capabilities, our talents and continue to acquire more clients that will actually.
Speaker Change: Utilizing these products.
Speaker Change: That generate fee income for us, while we're doing that I think the expense ratio.
We will be different.
And predominantly loans and deposits shop right. So the key really coming back down to so we start actually by voice upon the income stream.
Speaker Change: What does that mean.
Speaker Change: My position is that we know exactly what.
Speaker Change: The healthiest way to grow East West Bank balance sheet, and our P&L and we understand.
Speaker Change: How we should look at.
Speaker Change: And comparing with our peers.
Speaker Change: And as long as we continue to outperform our peers and sit in the top quartile.
Speaker Change: Good so I'm.
That's the reason why I looked at is if the efficiency ratio.
Speaker Change: So what he thinks to 40%.
Speaker Change: It's not a big deal and quite frankly, right now it looks ridiculously low right now so I'm not too worried about it.
Speaker Change: Very clear thank you.
Speaker Change: And your next question today will come from Tim Here Brasilia with Wells Fargo. Please go ahead.
Speaker Change: Good afternoon, and humor, hi, good afternoon, Hi, I'm just looking at some of the loans that were affected by the wildfires just remind us of the insurance requirements for your F. A far book, specifically and then maybe just walk us through kind of the timeline.
Speaker Change: Insurance collections and what the obligations that the bank might be to the impacted borrowers.
Speaker Change: Yeah. So wait question two more and as we looked at the exposure and the long I can also say affirmatively that all impact in property.
Speaker Change: Our covered on that.
Speaker Change: What happened is that adequate.
Speaker Change: Out of all long gone.
Speaker Change: Gone through this in the past as well I mentioned I think the wildfires, let's say in 2020 or beyond.
Speaker Change: Uh huh.
Speaker Change: At the end of the day the track record that we had is we really don't have much impact because we make sure that the hazard ratio there.
<unk> placed on the property and the Ltvs are low borrowers have enough what did you eat dog, but realistically. These things can take time and also especially for mortgages consumer loans, where people live in these home. This is certainly something we will accommodate all constantly.
Speaker Change: Okay and then.
Speaker Change: Maybe this is hard to kind of frame, but just looking at the impact on the small business side and potential C&I impact you know how do you start to frame some of that potential disruption in and maybe what are some of the expectations for east west to participate in the recovery process.
Speaker Change: Yeah. Great question, you know at first blush as we're looking through our portfolios. This when do you also include added promotional in industrial alone five businesses.
Speaker Change: Or are located in the impacted area or businesses that might've had a collateral and those impacted areas. As you know we have many C&I loans.
Speaker Change: Are they all kind of like a real estate, maybe sometimes told one related to the actual business. So from that perspective, you know, we're very comfortable because of those factors.
Speaker Change: The numbers I shared earlier, our small businesses and the impact you know one by one we are reaching out to the customers to get that information. Thus far I would say there hasn't been anything that we're really concerned about but again small business owners are part of the community and if there are things that we need to do to accommodate.
Speaker Change: Certainly look at that.
Speaker Change: Great and then just last for me and I wouldn't want to add that there are substantial.
Speaker Change: Assistance coming from both federal state and.
Speaker Change: Local government. So you know obviously for small business no S. P. A out there you know our graduate to standby for relief you know and then female et cetera. It's just a it's not only east west that we are more than happy to provide flexible solution to accommodate all of us.
Speaker Change: <unk> business customers, but also Deb.
Speaker Change: Our out there plenty of all of our resources.
Speaker Change: Be ready to support you know these out.
Speaker Change: Customers that are impacted by the wildfires.
Speaker Change: Great and then just last for me looking at the end of period balance versus the average both are up and the period, obviously up much more I'm. Just wondering does all of that stick around into the first quarter or some of that end of period growth in DDA transitory in nature.
Speaker Change: Well sure we have some year end transitory deposits, but I think what we draw comfort from is as we sit here three weeks into the quarter. Our DDA mix seems to have stabilized where we are and we think it probably is on a positive trajectory.
Speaker Change: Forward.
Great. Thank you.
Speaker Change: And your next question today will come from Ben Garlinger with Citi. Please go ahead.
Ben Garlinger: Hey, good afternoon, everyone.
Speaker Change:
Speaker Change: It's kind of follows up on and on.
Speaker Change: Question. When you think about just the CD repricing are nowhere near your special has already started new year's actually next week and I'm pretty sure you have some hedge roll off I think it was mid quarter.
Speaker Change: Are you thinking about just kind of a net impact outside of China.
Speaker Change: Kind of loans and deposits I guess, you're saying.
Speaker Change: Can you give us some color on kind of what you're expecting.
Speaker Change: Like our margin might be for <unk>, just because once you have so much noise in it.
Speaker Change: Yeah, I mean, I think the short term answer is it'll get better.
Speaker Change: So the reality is we don't expect much if anything on the rate action side in Q1, we set out the forward said, we know the hedges are rolling off and we know that we're going to replace some deposits still lower so all of that's positive.
Speaker Change: Gotcha. Okay that is helpful. I think everything else has been asked and answered so I appreciate the time.
Speaker Change: Uh huh.
Speaker Change: And your next question today will come from Chris Mcgratty with K B W. Please go ahead.
Chris: Oh, great. Thanks, Chris.
Chris: Hey, Chris Hey, Dominic a hearing on slide 13 on the expense guide is the starting point.
Chris: Dollars like this gap ex tax credit or are there other adjustments for kind of one offs that happened during the year.
Dominic: Well I get the right starting point there was a small there was a small amount of S. V. I see so I think we're focusing here on me.
Dominic: Operating non interest expense line. So if you look at slide 10 of the of the press release tables, you know it's that number.
Dominic: As a base and that includes the efficacy land, but obviously you know we don't expect any F. D. A C. A specialist that sometimes it afford so.
Dominic: That's sort of a baseline for your focus on.
Dominic: Okay, and then within that the could you help on the tax amortization, that's that's backed in or baked into the guide.
Dominic: So actually the tax foundation as the next line below that so that's why we focus on the operating non interest expense growth.
Dominic: Another important right.
Dominic: But for 2025, I'm, just trying to get the right amortization in.
Dominic: And the adjusted line.
Dominic: Oh, it'll probably be closer to what I, we didn't specifically guide on that I mean, the tax rate would be in that 'twenty, one to 'twenty three range, but we don't think tax amortization is poised to move.
Dominic: So it has been in best that's part of why we adopted.
Dominic: The Pam accounting, we adopted and we think it'll be a more normalized number in the range of this you know what we did in 2024.
Dominic: Okay, it'll all be in there.
Dominic: Excellent.
Dominic: But it'll offset in the tax law.
Dominic: Understood Okay, Great and then Dominic on the capital kind of capital use commentary.
Speaker Change: Are there any businesses or or noninterest income opportunities that you would consider to diversified our revenues and deployment of capital.
Speaker Change: Anything that we would consider but it's a high bar. The reason is that we've done.
Speaker Change: Putting well in fact, the last 10 years, we haven't made an acquisition.
Speaker Change: And so.
Speaker Change: The way I looked at it is that anything that we wanted to do.
Speaker Change: In terms of inorganic.
Speaker Change: Our growth related.
Speaker Change: To a certain extent Huawei in neatly I can have a positive impact to the <unk>.
Speaker Change: Balance sheet, and possibly even P&L that that's the challenge it's a distraction from our focus on running our business. We've done really well what we are doing just focusing on growing organically. So that's why I say, it's a high bar.
Speaker Change: Would not be easy to find these potential acquisition I think it's a lot easier for institution, who find acquisition target when they have no ability to grow.
Speaker Change: Our ability to generate business and then the easiest thing to do is to go buy somebody and then kind of all the cost right. So for us.
Speaker Change: That's not what we're good at.
Speaker Change: We could actually growing business and relationship banking so in that standpoint, that's why it's a high bar makes it are not.
Speaker Change: Well I call highly likely that we'll find it opportunity, but obviously we are out there you know keeping our eyes open.
Speaker Change: Great. Thank you.
Speaker Change: Your next question today will come from Gary Tenner with D. A Davidson. Please go ahead.
Gary Tenner: Thanks, Good afternoon, Gary I wanted to I wanted to ask about how you're thinking about just overall balance sheet growth. As your you gave the guide on loan growth, but you got at least a part of that picture will be.
Gary Tenner: Outstanding AR I think matures here in the first quarter and the lunar new year special. So how are you thinking about utilizing you know phones would grab whatever you know pretty good growth quarter on the deposit side. When you use them to indemnity Tobi or would you plan to roll that they told me.
Gary Tenner: So I think what we're I think we think about the balance sheet growth.
Gary Tenner: Your desired end state of being here always to support our customers first and foremost with whatever their borrowing needs, maybe and they always have the liquidity and the funding to make that rather be available second we'd look at opportunistically continue to manage them invest in liquidity levels. We think those are pretty strong right now so that's not the incremental.
Gary Tenner: Thrust at the moment, but we will continue to evaluate that with changing market conditions, and then yeah to pay down our other higher cost borrowings.
Gary Tenner: Borrowings or other higher cost deposits within our portfolio and so as we sit here today, we're optimistic that we'll get good traction on the lunar CD special and if that produces additional excess funding and beyond our borrowing rose will certainly be looking at how best to deploy that.
Speaker Change: And is there how much of that of the floating part of F. N B matures in the first quarter.
Speaker Change: There's a billion that comes due later in the quarter and we will have the opportunity to see how much we garner from the CD program as we evaluate how we fund pay down a road that.
Speaker Change: Perfect. Thank you.
Speaker Change: Well you don't need to have some time to maturity to make sure.
Speaker Change: We may have time to maturities to make sure we have that flexibility around the timing of our expected CD campaigns.
Speaker Change: This will conclude our question and answer session I would like to turn the conference back over to Dominic King for any closing remarks.
Speaker Change: Well I just like to thank everyone for joining our call today and we are looking forward to speaking with you in April Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].